Fraud detection is typically a manual process that involves culling through transactions to find fraud patterns. It is not an exact science and oftentimes good customers are identified as potential fraudsters. Fraud affects many types of transactions, including transactions involving targeted benefits. Targeted benefit programs provide a way for qualifying individuals to receive subsidies to purchase certain goods and services. Fraud may occur in the form of benefit trafficking, which may involve two participants who are in agreement, such as a willing merchant to purchase the benefit for cash and a willing customer authorized to redeem the benefit. Because there is no victim, this type of trafficking is particularly more difficult to detect and thus more difficult to thwart. In the field of targeted benefits, it is also difficult to determine an appropriate course of action because complete denial of benefits, even to a fraudster, is discouraged. It is estimated that millions of dollars are used for improper purchases, thereby defeating the goal and purpose of many benefit programs.
Other drawbacks may also be present.